A TV station revenue source that barely existed a decade ago now is pushing up monthly pay-TV bills, triggering a slew of station-group merger deals and even creating standoffs that caused TV stations to be blacked out on some cable systems for months.

In 2008, so-called "retransmission consent" fees — the money that TV stations get from cable and satellite providers for the right to carry their signals — made up, for example, only 4.5% of station owner Nexstar Broadcasting's revenue.

Last year, it was 14.5%, and the money helped Irving, Texas-based Nexstar buy 18 more TV stations, strengthening its leverage in demanding higher fees from pay-TV systems.

"It diversifies our revenue," says Perry Sook, CEO of Nexstar, which now owns 72 stations nationwide and has deals for 19 more. "Scale matters just to even the level playing field. Without retransmission fees, we'd look more like the newspaper business rather than TV business."

The fees were first paid by cable companies in the mid-2000s. The federal law covering retransmission consent was passed in 1992, but cable companies didn't pay fees and local stations didn't seriously begin demanding them until about a decade later. Now they range from a few cents per month per pay-TV subscriber for small stations to nearly a $1 for larger network affiliate stations.

The fee increases continue to accelerate and become a significant factor in pushing up pay-TV bills. The total is expect to more than double from $2.36 billion in 2012 to $6.05 billion — about 23% of total TV station revenue — by 2018, according to industry research firm SNL Kagan.

"At some point it has to stabilize, or it's just not sustainable," says Andrew Rosenberg, Time Warner Cable's senior vice president of content acquisition.

Broadcasters, a group that includes TV networks and their affiliate station owners, insist their content is more popular than cable channels. "Since cable companies re-sell our local TV stations as part of their program packages to consumers, local stations deserve to be fairly compensated for the value of our product," says Dennis Wharton, executive vice president of communications for the National Association of Broadcasters.

Pay-TV providers also argue that it's a cost passed on to their customers, while they get the brunt of consumers' ire.

"When content companies raise prices, they're not the ones that irritate consumers. They see the bill from cable companies," says John Bergmayer, an attorney at Public Knowledge, a Washington, D.C.-based public advocacy firm specializing in technology issues. "It's a pocketbook issue."

Wharton says that an average of only about 2 cents of every dollar in cable revenue comes from the fees.

The battle over the fees has sometimes gotten so heated that TV stations have been blacked out on cable for lack of a consent deal.

An NBC affiliate's programming was pulled for Time Warner Cable subscribers in the Corpus Christi market for about five months starting in December 2011 — thus, no Super Bowl that year for cable viewers — until both sides came to an agreement in May 2012.

Time Warner Cable faces another round of national negotiations with the stations CBS owns following expiration of their contract last month, but wishing to avoid that kind of disruption, the parties have agreed to continue to let the system carry CBS programs while talks continue. CBS is seeking to roughly double its retrans fee total to about $500 million this year.

Such relative peace has reigned in the market so far this year. There have been 22 cases of blackouts nationwide, down from 91 and 51 in 2012 and 2011, respectively, according to American Television Alliance, a coalition of pay-TV providers that seek to raise awareness of the retrans issue.

REFORMS PROPOSED

Pay-TV providers have pitched reforms to the current system, generally centered around avoiding blackouts.

Matthew Polka, CEO of American Cable Association, says that while the industry remains opposed to the whole idea of fees, it is willing to continue to pay over-the-air broadcasters under a set of changes, including that a broadcast company should only be able to negotiate on behalf of its own stations. "We think any kind of coordinated negotiations like that should be banned," he says.

Cable providers also have lobbied lawmakers to force broadcast stations to continue to air shows during negotiations even after contracts expire.

That's an unfair leverage, Nexstar's Sook says. "What incentives do they then have to negotiate in good faith?" he says.

Pay-TV providers also want to be able to "import" a network station from another market, a practice currently prohibited by federal rules, if a local network affiliate decides to go dark.

Third-party arbitration also could be "a sensible reform," Public Knowledge's Bergmayer says.

The stakes are high: At Nexstar, retrans revenue rose 64.2% to $23.8 million in the first quarter this year, outpacing the more modest 32.6% growth in advertising. Other broadcasters report similarly increasing rates.

On the other side, DirecTV's retrans payments are anticipated to rise 600% per subscriber from 2010 to 2015, says Susan Eid, executive vice president of government and regulatory affairs at the satellite TV provider.

CONSOLIDATION IS KEY

Station groups, meanwhile, are on the prowl for acquisitions, bulking up to better their position in fee talks. Just in recent weeks, media giants Gannett and Tribune Co. agreed to buy buckets of TV stations from rivals (Gannett is the parent of USA TODAY).

"The TV business has become very hot in the last year to 18 months," says Robin Flynn, a senior analyst at SNL Kagan.

"Consolidation has definitely accelerated demand by networks and affiliates for more retrans consent," agrees ACA's Polka.

About $9.1 billion worth of TV stations have been bought so far this year, vs. $1.9 billion in all of 2012, according to Kagan. As of June 20, 160 stations have changed hands vs. 97 sold in all of 2012.

Broadcasters say their higher cost of buying from TV networks — either as a separate fee or a cut of retrans fees — leaves them no choice but to seek more from distributors. Sports programming, in particular, has become more expensive, Flynn notes.

Polka says the cycle of rising payments would end if federal regulators reform the rules regarding retrans fees. "If they're overpaying for programming, consumers shouldn't be forced to pay for it," he says. "They are paying more because they know they can force the payment down to consumers."